[Updated 4:10 p.m.] New York Attorney General Andrew Cuomo on Wednesday filed a federal lawsuit against microchip giant Intel Corp. making his the first formal antitrust action against Intel by any U.S. agency in more than a decade. The FTC launched an examination into Intel in 2008 but has not made its probe official. Cuomo's complaint charges that Intel violated state and federal laws by engaging in "a worldwide, systematic campaign of illegal conduct" to maintain its dominance in the microprocessor sector.
"Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market," said Cuomo, who served Intel with a wide-ranging subpoena in January 2008. "Intel's actions not only unfairly restricted potential competitors, but also hurt average consumers who were robbed of better products and lower prices," he added. Intel has repeatedly denied antitrust allegations and filed an appeal against a recent European Commission ruling.
More than 20 lawmakers recently urged Justice Department antitrust chief Christine Varney and FTC Chairman Jon Leibowitz to view the European antitrust ruling with a critical eye and weigh its impact on U.S. high-tech firms. The Sept. 18 letters to Varney and Leibowitz, spearheaded by Oregon Reps. Earl Blumenauer, a Democrat, and Greg Walden, a Republican, argued the Intel ruling "is the latest evidence of a troublesome trend in Europe toward regulatory protectionism."
FTC Chairman Jon Leibowitz on Monday lauded former Genentech CEO Arthur Levinson -- a member of the corporate boards of both Google and Apple -- for stepping down from Google's board. The news follows an announcement earlier this summer that Google CEO Eric Schmidt, who had also been a director of both firms, was stepping down from the Apple board. Federal antitrust law prohibits, with certain exceptions, one person from serving as a director or officer of two competing corporations. Levinson's resignation takes effect immediately. He had been on the Google board since April 2004.
"Google, Apple, and Mr. Levinson should be commended for recognizing that overlapping board members between competing companies raise serious antitrust issues and for their willingness to resolve our concerns without the need for litigation," Leibowitz said in a statement. "Beyond this matter, we will continue to monitor companies that share board members and take enforcement actions where appropriate."
In a press release, Schmidt said Levinson has contributed to Google's success by "offering unvarnished advice and vital counsel on every big issue and opportunity." "Though he leaves as a member of our board, Art will always have a special place at Google," Schmidt said. Levinson, who left Genentech's day-to-day operations upon the biotech firm's $47 billion merger with Swiss drug maker Roche, called his time with Google "a remarkable experience" and said the company has "a terrific future."
More than 20 lawmakers are urging Justice Department antitrust chief Christine Varney and FTC Chairman Jon Leibowitz to view recent European antitrust rulings with a critical eye and weigh the impact of those decisions on U.S. high-tech firms such as Intel, Google, Microsoft, IBM and Qualcomm. Their effort comes on the heels of the European Commission's $1.45 billion judgment against Intel for excluding competitors from the market for chips known as x86 central processing units.
Sept. 18 letters to Varney and Leibowitz, spearheaded by Oregon Reps. Earl Blumenauer, a Democrat, and Greg Walden, a Republican, argue the Intel ruling "is the latest evidence of a troublesome trend in Europe toward regulatory protectionism." Other successful U.S. firms have faced hefty fines, are under investigation, or possibly face scrutiny from the Commission's competition directorate, they said. The Intel decision "ignores the reality of a highly competitive marketplace," they wrote in the document initially circulated on the Hill this summer.
Intel, which is the subject of an FTC investigation, was a major contributor to the 2008 races of Blumenauer and Walden and employs more than 15,000 people at Oregon facilities, making it the state's largest private employer. The company also has a workforce of several thousand in New Mexico. Democratic Reps. David Wu of Oregon, Harry Teague of New Mexico, Rush Holt of New Jersey, House Science Chairman Bart Gordon and others signed the letter.
The European Commission on Monday continued to make its case against computer chip Intel by publishing a non-confidential version of a May decision, which carried a $1.45 billion fine for excluding competitors from the market for chips known as x86 central processing units. The documents, which include a summary of the key elements of the ruling, outline specific cases in which regulators believe Intel engaged in so-called conditional rebates and naked restrictions as well as how the firm allegedly sought to conceal its practices to disadvantage rival Advanced Micro Devices.
Intel reached an agreement with antitrust authorities in Japan but has appealed the European ruling and a similar decision in South Korea. The release of the Commission's analysis comes as Intel is being investigated in the United States by the FTC. The company has also faced scrutiny on Capitol Hill. Intel has argued that the model used overseas is worlds apart from the U.S. model and should not be seen as an indicator of how the FTC might proceed. Meanwhile, new Assistant Attorney General Christine Varney had vowed to reinvigorate antitrust enforcement in the Obama administration.
An Intel spokesman issued a strongly worded reaction, saying that there is nothing new in what the Commission released and its decision reflects "the underlying bias we have come to expect from the case team that ran this investigation." "We are convinced that the Commission's conclusions regarding our business practices are wrong, both factually and legally," he said, pointing out that the panel "relied heavily on speculation" and "ignored or minimized hard evidence of what actually happened."
Four consumer and privacy groups will ask the Justice Department's top antitrust official on Monday to conduct "a thorough and rigorous examination" of the proposed 10-year advertising agreement Microsoft and Yahoo announced in July. In a letter to Assistant Attorney General Christine Varney, the Center for Digital Democracy, Consumer Action, Consumer Watchdog and the U.S. Public Interest Research Group, argue that the firms have historically operated competing ad-targeting businesses in search, display and mobile advertising, as well as competitive ad exchanges.
"In order to ensure that American consumers and competitors are given the 21st century safeguards they require, both the DOJ and FTC must carefully examine how the proposed
Microsoft/Yahoo agreement will impact the digital marketplace," they write in the letter, which will also be sent to FTC Chairman Jon Leibowitz and Senate Judiciary Antitrust Subcommittee Chairman Herb Kohl, D-Wis. Kohl previously said his panel would closely review the deal. An ad arrangement between Google and Yahoo fell apart in 2008 after regulators warned they would file a lawsuit to block it.
The letter argues that the proposed combination of Microsoft's and Yahoo's search platforms effectively undermines the latter as a meaningful competitor as it gives up its ability to offer marketers a robust search and display combination. DOJ must ask whether the plan is "simply a precursor to the eventual absorption by Microsoft of Yahoo's various advertising holdings" and whether the combination of their data collection, profiling, and targeting technologies could place competitors at a disadvantage, they state.
The FTC and Justice Department have given their blessings for Sprint-Nextel's planned $483 million merger with Virgin Mobile USA, officials confirmed Monday. Because Virgin, and its recent acquisition Helio are both MVNOs (mobile virtual network operators), analysts did not expect the deal to raise serious antitrust issues and thus believed regulators would approve the pairing. The deal could still be subject to review by the FCC, which has yet to issue a public notice on the matter. Virgin Mobile holds a small number of international licenses, which need to be transferred and require approval by the FCC, analysts at Stifel Nicolaus said in an e-mail. In its orders approving Verizon's combination with Alltel and Sprint's purchase of Clearwire last November, the FCC reaffirmed its view that MVNOs and resellers should be excluded from its analysis of the competitive impact of a wireless merger, they wrote.
The Justice Department has approved Oracle Corporation's acquisition of Sun Microsystems and terminated the waiting period under the Hart-Scott-Rodino Act, the companies announced Thursday. Sun's stockholders approved the transaction on July 16 and the transaction's closing is subject to certain conditions, including clearance by the European Commission. In April, Oracle announced its intention to buy Sun common stock for $9.50 per share in cash. The transaction is valued at approximately $7.4 billion, or $5.6 billion net of Sun's cash and debt. IBM previously abandoned its bid for the iconic software company, in part, analysts believe because of perceived risk that antitrust authorities, either in the United States or the EU, would reject the deal.
Oregon Reps. Earl Blumenauer, a Democrat, and Greg Walden, a Republican, want Justice Department antitrust chief Christine Varney to view recent European antitrust rulings with a critical eye and weigh the impact of those decisions on U.S. high-tech firms such as Intel, Google, Microsoft, IBM and Qualcomm, CongressDaily's PM Edition reported Friday. Their effort comes on the heels of the European Commission's $1.45 billion judgment against Intel for excluding competitors from the market for chips known as x86 central processing units.
"That ruling is the latest evidence of a troublesome trend in Europe toward regulatory protectionism," they wrote in a draft letter circulating on Capitol Hill. Other successful U.S. companies have faced hefty fines, are under investigation, or possibly facing scrutiny from the Commission's competition directorate, they said. The Intel ruling "ignores the reality of a highly competitive marketplace," said the draft, noting that microprocessor prices have dropped drastically in the last decade. "The significant decrease in prices, together with the unprecedented increase in quality, speed, functionality and choice of microprocessors, reflects that market's robust health."
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FTC Competition Bureau Director Richard Feinstein said Monday the Commission will continue to investigate remaining interlocking directorates between Apple and Google despite the fact that Google CEO Eric Schmidt has stepped down from the computer manufacturer's board. The FTC has been examining the Google-Apple connection for some time and Feinstein commended the companies for recognizing that sharing directors raises competitive issues as Google and Apple increasingly compete with each other. Schmidt has served on Apple's board since 2006 and since that time has entered the Web browser and operating system business with Google's Android and Chrome products.
"Eric has been an excellent board member for Apple, investing his valuable time, talent, passion and wisdom to help make Apple successful," Apple CEO Steve Jobs said in a press release. "Unfortunately, as Google enters more of Apple's core businesses... Eric's effectiveness as an Apple board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest," Jobs said. Arthur Levinson, the former CEO of Genentech also sits on the boards of both companies. Read more here and here.
The House Judiciary Courts and Competitive Policy Subcommittee voted Thursday to prohibit agreements that set minimum prices on goods or services, reversing a 2007 U.S. Supreme Court decision. On a voice vote, the subcommittee agreed to the bill and sent it to the full committee, which is not expected to take it up before fall. Courts and Competitive Policy Subcommittee Chairman Hank Johnson, D-Ga., said the Supreme Court upset 96 years of law that will make consumers pay higher prices. "This bill takes a stand for the consumer," said Johnson. Read more about the split decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. here.
Internet auction giant eBay, which has emerged on the front lines of the movement to restore the vertical price fixing ban, lauded the subcommittee's action. "When large manufacturers and their biggest retail partners enact price-fixing policies they burden consumers with inflated prices and rob the economy of the value provided by small business competition," eBay Vice President Tod Cohen said. But Rep. Darrell Issa, R-Calif., said there may be occasions when minimum resale price maintenance is important, such as to preserve warranties or to protect small retailers against giant discounters. He was assured by Johnson that the bill would be developed further before the full committee takes it up.
Read CongressDaily's full mark up report for H.R. 3190 here (subscription required).
An advertising partnership unveiled Monday by Yahoo and Microsoft is already raising eyebrows among lawmakers. Senate Judiciary Antitrust Subcommittee Chairman Herb Kohl, D-Wis., said his panel would closely review the deal, which would result in direct competitors working together. A similar deal between Google and Yahoo fell apart in November after U.S. regulators warned they would file a lawsuit to block it.
"Our subcommittee is concerned about competition issues in these markets because of the potentially far-reaching consequences for consumers and advertisers, and our concern about dampening the innovation we have come to expect from a competitive high-tech industry," Kohl said in a statement. Senate Judiciary Antitrust Subcommittee ranking member Orrin Hatch, R-Utah, said he did not see "any immediate yellow flags" from an antitrust front. Competitive Enterprise Institute argued regulators "can best serve consumer interests by leaving well enough alone."
But some watchdogs disagree. They say the relationship could be an initial step toward complete integration of the two firms, raising questions about the collection and sharing of consumer data. The Center for Digital Democracy's Jeff Chester said he will ask antitrust officials in the United States and Europe to "closely and skeptically" examine the deal. "What we are now witnessing is the emergence of a global digital advertising duopoly: Google and Microsoft/Yahoo," Chester said.
More than eight months after abandoning its planned advertising partnership with Google amid intense scrutiny from Capitol Hill and the Justice Department, Yahoo is joining forces with Microsoft. The companies announced an agreement Wednesday that they believe will improve the Web search experience for users and advertisers. Under the plan, which they expect to close in early 2010, Microsoft would power Yahoo search while Yahoo will become the exclusive worldwide relationship sales force for both companies' premium search advertisers, according to a press release.
The agreement does not cover each company's Web properties and products, e-mail, instant messaging, display advertising or any other aspect of the companies' businesses. "In those areas, the companies will continue to compete vigorously," they stated. The transaction will be subject to regulatory review and the agreement entered into Wednesday anticipates that the parties will enter into more detailed definitive arrangements prior to closing. The pair acknowledged that their deal will "be closely reviewed by the industry and government regulators" and they welcome questions.
Under the 10-year agreement, Microsoft will acquire an exclusive license to Yahoo's core search technologies, and Microsoft will have the ability to integrate Yahoo search technologies into its existing Web search platforms. Microsoft's new search engine Bing will be the exclusive algorithmic search and paid search platform for Yahoo sites. "Providing a viable alternative to advertisers, this deal will combine Yahoo and Microsoft search marketplaces so that advertisers no longer have to rely on one company that dominates more than 70 percent of all search," the firms said in an indirect jab at Google.
As Senate Judiciary Antitrust Subcommittee Chairman Herb Kohl, D-Wis., urged the Justice Department on Monday to take caution as it investigates a pending merger between Live Nation and Ticketmaster, Rep. Bill Pascrell, D-N.J., sent a stronger message to regulators -- essentially asking that the $2.5 billion all-stock transaction be blocked. Kohl wrote to Assistant Attorney General Christine Varney saying she should approve the pairing only if she finds the deal is unlikely to lead to higher prices for consumers or cause substantial harm to competition in the concert ticketing and promotions. Read more on that in CongressDaily's PM Edition (subscription required).
Pascrell, whose letter was signed by more than 40 colleagues, wrote that "consumers, business managers, artists, independent promoters, and music fans in every state are likely to suffer if the merger is allowed to occur." The lawmaker has also urged a federal probe of Ticketmaster since its February sale of tickets for Bruce Springsteen's latest concert tour. Online ticket buyers were redirected by Ticketmaster to its higher priced re-sale site, TicketsNow.com, when the tickets were first offered for sale. He has also introduced a bill intended to bring greater transparency to the ticketing marketplace. The companies have justified the deal on efficiency grounds and argued it will benefit consumers.
In February, the CEOs of Live Nation and Ticketmaster tried mightily to convince skeptical senators that their merger would ultimately benefit performing artists and consumers. The executives argued at a hearing that competitors abound in the concert and ticketing arenas, but the system is broken from an artist and fan perspective. Read coverage of that hearing here (subscription required).
High-tech giant Intel lodged its appeal Wednesday in the European Court of First Instance against the $1.45 billion fine imposed by the European Commission earlier this year. The company did not give specific details of the legal grounds for its complaint but ZDNet UK reported that the European court will publish details of the appeal in several weeks. "We felt the EC decision was incorrect, and that evidence was ignored or misinterpreted," an Intel representative told ZDNet UK on Thursday. "We believe the Commission ignored the realities of the microprocessor market, which is highly competitive."
The fine for excluding competitors from the market for x86 central processing units was the largest penalty ever assessed by the European Union for a breach of competition, and it followed actions against Intel in Japan and South Korea. U.S. regulators are also getting involved. The FTC acknowledged in June 2008 that, after several years of scrutiny, it was opening a formal probe of Intel. Intel and rival chipmaker Advanced Micro Devices, whose microprocessors are based on Intel's x86 architecture, have ratcheted up their Washington lobbying efforts. Read more in National Journal here (subscription required).
Telecommunications analysts at Stifel Nicolaus on Friday said an advertising and search deal between Microsoft and Yahoo would get a close look from the Justice Department and probably the European Union's antitrust authorities. Sources at the two high-tech companies said an agreement in imminent and could be announced as soon as next week. The All Things Digital blog reported that top Microsoft executives traveled Thursday to Silicon Valley to smooth out technical issues and said Microsoft CEO Steve Ballmer is reportedly deeply involved with the talks.
"We have always viewed a Yahoo deal with Microsoft as less risky, from the standpoint of antitrust review, than a deal with Google," Stifel Nicolaus analysts said in an e-mail. Google last year eventually backed off its efforts to do a search transaction with Yahoo in the face of resistance from the DOJ and criticism from Capitol Hill. There are several elements of a Yahoo-Microsoft deal that pose risk, the analysts said. The antitrust review would depend on the precise terms of the deal, which could take the form of a Microsoft acquisition of all of Yahoo, or, more likely, could be another run at some type partnership, they said.
Tech watchdog Jeff Chester warned the companies would not get a free pass from privacy and consumer groups even if the pairing would provide much needed competition to Google. Microsoft and Yahoo have created elaborate data collection services across platforms and applications and they have competing ad targeting businesses in search, display and mobile, he said. "Microsoft and Yahoo should expect privacy and consumer groups to vigorously press regulators to closely and skeptically examine the deal -- and at the very least impose a series of tough conditions on data collection practices," he said.
Internet auction giant eBay has emerged on the front lines of a congressional movement to restore a century-old ban on vertical price-fixing that was overturned by the Supreme Court in 2007. The company's vice president, Tod Cohen, testified before a Senate Judiciary Antitrust Subcommittee hearing Tuesday in favor of legislation that its chairman, Sen. Herb Kohl, D-Wis., has advanced to reinstate a regime that was overturned by the high court's split decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. "Retail price-fixing, as allowed for in the Supreme Court's Leegin decision, is anti-competitive, and hurts small businesses and consumers," Cohen said, noting that citizen benefit from of an open Internet and open competition. He testified at a similar House Judiciary Courts and Competition Policy Subcommittee hearing last month.
"Because of the Leegin decision, large manufacturers and their biggest retail partners are able to use price-fixing to curtail Internet and small business based competition. These established players are threatened by innovative online businesses, such as eBay sellers, that offer consumers better prices, more options and new services," he said in a statement. "During difficult economic times, consumers should not be denied the choice and value that robust small business competition provides." Cohen said that his Web site has experienced a surge in takedown requests since the court's ruling, with one firm called Net Enforcers making more than 1.2 million complaints about low-price listings. FTC Commissioner Pamela Jones Harbour and an executive from Burlington Coat Factory also testified in support of Kohl's bill, which the American Bar Association and the National Association of Manufacturers oppose.
Read CongressDaily's hearing coverage here.
As Congress and the Justice Department continue to examine Ticketmaster's planned $2.5 billion all-stock merger with Live Nation, the ticket-selling giant has found itself in hot water again. TicketsNow.com, a secondary ticket resale site owned by Ticketmaster oversold thousands of tickets to a Monday night Bruce Springsteen concert in Washington and then contacted customers who bought passes at inflated prices to tell them they didn't have the premium seats they thought they had. As a result, D.C. Attorney General Peter Nickles has issued subpoenas in an investigation into Ticketmaster's resale practices. Nickles told FOX 5 News it will take about 10 days for his office to receive documents pertaining to those transactions. Ticketmaster apologized and promised never to link concertgoers to their own resale Web site in a manner that would create any future confusion.
Meanwhile, Rep. Bill Pascrell, D-N.J., who first brought congressional attention to the Ticketmaster/TicketsNow relationship, has proposed banning the use of automated ticketing programs and reign in the secondary ticket market. Pascrell testified before a House Judiciary Courts and Competition Policy Subcommittee hearing earlier this year and a similar examination was held by the Senate Judiciary Antitrust Subcommittee. Pascrell also asked the FTC to launch an investigation. "Time and time again Ticketmaster has claimed that these repeated incidents of price gouging and consumer fraud represent exceptions and not the rule," Pascrell said in a statement. "This most recent incident makes it clear as day that we need more transparency and accountability in the secondary ticket market." Read CongressDaily's Ticketmaster coverage here, here, and here.
The FTC has dismissed its case against computer memory manufacturer Rambus, which the Commission argued had engaged in unlawful market monopolization. The end to the high-profile litigation follows a recent denial of the FTC's request that the Supreme Court review the case. "We are pleased to have finally put this matter behind us," Rambus General Counsel Thomas Lavelle said in a statement, noting that his firm prevailed on related claims at the Court of Appeals for the Federal Circuit, in front of a jury, and before a district court. The FTC first brought charges against Rambus in 2002.
"While we remain disappointed by the decision of the Court of Appeals, we of course respect the Court's opinion and will move forward," FTC Competition Bureau Director Richard Feinstein said. "The standard-setting issues that were at the heart of this case remain important, both as a matter of antitrust policy, and in order to protect consumers, and we will remain vigilant in this area." The FTC brought charges against Rambus relating to the firm's participation in an industry standard setting committee for dynamic random access memory. In 2008, Appeals Court Judge Stephen Williams said the commission "failed to sustain its allegation" that Rambus deceptively hid the fact that four of its technologies were incorporated into the standard.
Microprocessor giant Intel Corp. took a beating by the European Commission on Wednesday as regulators fined the company $1.45 billion for violating antitrust rules by engaging in illegal anticompetitive practices to exclude competitors from the market for computer chips called x86 central processing units. The Commission ordered Intel to cease the illegal practices immediately to the extent that they are still ongoing. The company has vowed to fight the ruling. "We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace -- characterized by constant innovation, improved product performance and lower prices. There has been absolutely zero harm to consumers. Intel will appeal," CEO Paul Otellini said.
But EC Competition Commissioner Neelie Kroes disagrees. She issued a statement saying Intel has harmed millions of European consumers "by deliberately acting to keep competitors out of the market for computer chips for many years." "Such a serious and sustained violation of the EU's antitrust rules cannot be tolerated," she said. Intel rival AMD cheered the decision, saying it was a critical step toward a truly competitive market. "After an exhaustive investigation, the EU came to one conclusion - Intel broke the law and consumers were hurt," AMD Executive Vice President Tom McCoy said. "With this ruling, the industry will benefit from an end to Intel's monopoly-inflated pricing and European consumers will enjoy greater choice, value and innovation."
High-tech giant Oracle agreed to buy Sun Microsystems for $7.4 billion after IBM abandoned its bid for the iconic software company, in part, analysts believe because of perceived risk that antitrust authorities, either in the United States or the European Union, would reject the deal. While the Oracle-Sun deal will likely receive serious scrutiny, a Monday afternoon memo from investment firm Stifel Nicolaus says its experts think it is likely to be approved. "We believe an Oracle-Sun deal faces significantly fewer obstacles in the antitrust review than an IBM-Sun deal would have, particularly as it does not raise the issues regarding consolidation in the server and storage markets that would have been problematic for a deal with IBM," they wrote.
There is less overlap between the product offerings of Oracle and Sun, which reduces horizontal concentration issues, the analysts said. Plus the deal does not pose the same vertical integration issues that IBM-Sun would or add fuel to existing antitrust investigations. There may be some concern among customers and suppliers about increasing Oracle's market position but the analysts think most will regard the arrangement as a welcome alternative to a Sun combination with IBM. While some may welcome a counterweight to IBM, others such as Microsoft may see the process as an opportunity to raise concerns about Oracle's growing market strength and potentially to even condition the deal, the memo said.
Oracle's acquisition of PeopleSoft, which was initially blocked by the Bush administration Justice Department in 2004, was subsequently allowed by a federal court after Oracle fought for the deal rather than folding, Stifel Nicolaus said. Oracle's deal with BEA was approved by both U.S. and EU regulators last year. "We don't think the approval of either of those deals carried any kind of 'okay, but no further' signal that would cause us to think the deal with Sun will have significant problems," the memo said. There are substantial long-term strategic customer advantages to Oracle owning two key Sun software assets: Java and Solaris, the firms said in a press release. "The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems," Oracle CEO Larry Ellison said.
The Justice Department wants to extend the term of certain portions of Microsoft's final antitrust judgment by at least 18 months, according to documents submitted Thursday to the U.S. District Court for the District of Columbia. The agency said an extension is necessary to ensure the quality of the technical documentation Microsoft provides to licensees. The agency made its views known as part of its joint status report to Judge Colleen Kollar-Kotelly who has been handling the high-tech giant's case. The DOJ antitrust division is charged with enforcing the final judgment in conjunction with officials from 17 states and the District of Columbia, which along with Microsoft joined in the filing.
In 2006, Microsoft agreed to a two-year extension of the communications protocol licensing program contained in a section of the final judgment, along with all of the final judgment's enforcement provisions. The company also agreed that the department and state antitrust enforcement agencies could ask for an additional extension of all or part of the extended provisions of the final judgment for a period of up to three additional years, through November 2012, according to DOJ. In the filing, the Obama is exercising its right to seek an extension of a certain section through May 12, 2011. Otherwise, the final judgment would have expired on Nov. 12, 2009.
The section in question requires that Microsoft make available to competing server software developers, on reasonable and non-discriminatory terms, certain technology used by Microsoft to make its server operating systems interoperate with client PCs running the Windows operating system, DOJ said. Microsoft also must provide licensees with technical documentation to help them to use the technology. In past status reports, the department raised concerns with the quality of the documentation Microsoft was providing and the length of time it was taking to improve that documentation. In 2008, National Journal's Technology Daily ran a series of stories examining the impact of Microsoft's epic antitrust battle nearly a decade after it began. View a PDF of that special coverage here.
Senate Judiciary Antitrust Subcommittee Chairman Herb Kohl, D-Wis., and the panel's top Republican, Sen. Orrin Hatch of Utah, on Wednesday unveiled their agenda for the 111th Congress. Among their ambitious list of issues are some high-tech gems.
• Kohl intends to continue his inquiry into the cause of sharp price increases for text messaging. From 2006 to 2008, the four leading cell phone providers doubled the per message cost of text messaging, from 10 to 20 cents per message.
• The subcommittee will continue to examine competition in the consolidating Internet and related online advertising industry with particular attention to deals like Google's purchase of DoubleClick and the now-abandoned Google-Yahoo ad partnership.
• Members want to examine competition in the broadband industry and the issue of "network neutrality" while monitoring whether consumers continue to have the freedom to access the Internet content they wish.
• The panel will examine media consolidation; rising cable television rates; and increased competition in the cable and satellite TV market as well as playing a role in the renewal of the Satellite Home Viewer Extension and Reauthorization Act.
President Barack Obama has appointed economist Carl Shapiro to become chief economist for the Justice Department's antitrust division, according to news reports. Shapiro, who served at the agency as a deputy assistant attorney general in the Clinton administration, is the author of "Information Rules" (with Hal Varian) and was an expert witness in the 1999 Microsoft antitrust case while a professor at the University of California in Berkeley. Shapiro has published extensively in the areas of industrial organization, competition policy, patents, the economics of innovation, and competitive strategy with his recent academic research focusing on antitrust economics, intellectual property, patent policy, product standards and compatibility, and the economics of networks and interconnection, according to his Berkeley bio.
"Shapiro is a leading authority on the economics of competition in the information economy. This is a top-flight appointment by the Obama administration and this expertise is just what the country needs now as it looks for ways to turn the economy around," Computer and Communications Industry Association President Ed Black said. He noted that Shapiro understands the impact of different types of corporate behavior on competition and what that means for creating a business climate where innovative start-up businesses can thrive. "Innovation can boost the economy, but a lack of antitrust oversight and badly needed intellectual property reforms can hold the information technology sector back," Black said in a statement.
About a week after promotion giant Live Nation formally announced its intention to buy Ticketmaster, a company that does much of its concert ticket business on the Internet, Congress is getting involved. Senate Judiciary Antitrust Subcommittee Chairman Herb Kohl, D-Wis., has announced a Feb. 24 hearing that will examine the deal and what it means for consumers and the future of the concert business. He and the subcommittee's top Republican, Sen. Orrin Hatch of Utah, issued a statement shortly after the company's announcement saying the merger should be closely reviewed. The House Judiciary Subcommittee on Courts and Competition Policy has also announced a similar hearing on Feb. 26. Witnesses for the hearings have not yet been announced.
"Any merger between two companies who would otherwise compete against each other raises significant antitrust concern when those companies already have significant market power," House Subcommittee Chairman Hank Johnson, D-Ga., said, noting the proposed merger "deserves serious scrutiny for any anticompetitive impact." House Judiciary Chairman John Conyers added the hearing would be the first test of the Obama administration's antitrust policy. Rep. Bill Pascrell, D-N.J., was the first to speak out about the deal as well as recent allegations that Ticketmaster sent Bruce Springsteen fans to a subsidiary Web site that sold concert seats at a premium cost.
Capitol Hill is keeping an eye on promotion giant Live Nation's planned $575 million acquisition of Ticketmaster, a company that does much of its concert ticket business on the Internet. Sens. Herb Kohl, D-Wis., and Orrin Hatch, R-Utah, believe the merger should be closely reviewed to ensure that the combined company does not gain inappropriate market power. "We are concerned about the antitrust implications of the proposed merger," the Senate Judiciary Committee members said in a statement. "We look forward to examining the details of this proposed acquisition to ensure that consumers are protected."
Rep. Bill Pascrell, D-N.J., who earlier this week raised concerns about the rumored business deal, said the Tuesday announcement by Live Nation and Ticketmaster was "a major disappointment for music fans all around the country." He said the arrangement threatens to increase concert prices and limit access for middle-class Americans to entertainment events. "We saw last week the trouble that can arise when one company exercises too much control over a market," Pascrell said, pointing to allegations that Ticketmaster sent Bruce Springsteen fans to a subsidiary Web site that sells concert seats at a premium cost.
"Any merger that would consolidate so many aspects of the concert business under one roof must be carefully scrutinized for antitrust violations by the relevant federal regulators and the United States Congress," Pascrell said. "This proposed company would have unprecedented control over nearly every single step of the music industry, from the managing and promoting of artists, to running the venues, to selling the tickets." Live Nation CEO Michael Rapino, however, said the combination "will drive measurable benefits to consumers and accelerate the execution of our strategy to build a better artist-to-fan direct distribution platform."
Rep. Bill Pascrell, D-N.J, who earlier this week requested a federal investigation of Ticketmaster's business practices and relationship with TicketsNow.com, commended musician Bruce Springsteen Thursday for speaking out against Ticketmaster. In an angry letter on his Web site, the rock 'n' roll Hall of Famer accused the company of gouging his fans when tickets went on sale Monday for his "Working on a Dream" tour. Consumers complained that Ticketmaster, which handled the original sales for many concert dates, was directing buyers to TicketsNow -- a site that sells seats at a premium cost.
"This recent flap with TicketsNow exposed how a corporation with too much influence over the entertainment industry can hurt the average American music fan," Pascrell said in a statement, citing news reports that Ticketmaster may try to merge with concert promotion giant Live Nation. "Such a transaction brings up serious antitrust issues that may only further disadvantage middle-class Americans and disenfranchise consumers," he said. He urged House Judiciary Committee Chairman John Conyers and Courts and Competition Subcommittee Chairman Hank Johnson, D-Ga., to hold hearings.
The Justice Department on Thursday filed a civil antitrust lawsuit against Microsemi Corp. alleging that through its acquisition of Semicoa assets, the firm eliminated or reduced competition in the development, manufacture and sale of certain semiconductor devices used in military and space programs essential to U.S. security. The department alleges that as a result of the transaction, prices for these products have increased and there is likely to be lower quality service. The complaint asks that a court require the Irvine, Calif.-based company to undo the transaction by selling off the assets it acquired in July.
Government lawyers argued that the acquisition created a monopoly for small signal transistors used by the Defense Department and reduced from three to two the number of likely competitors for ultrafast recovery rectifier diodes also used by the military. Transistors and diodes are semiconductor devices used to control the flow of electric current. While consolidation in the defense industry in certain circumstances may be beneficial, this transaction was not, Acting Assistant Attorney General Deborah Garza said in a statement.
The Supreme Court on Monday will hear a case that involves so-called "price-squeeze" claims under Section 2 of the Sherman Antitrust Act, which makes it unlawful for a company to monopolize, or attempt to monopolize, trade or commerce. Pacific Bell Telephone Co. v. linkLine Communications stems from a 2003 lawsuit by several Internet service providers, including linkLine, against Pacific Bell who complained the AT&T unit unfairly dominated a particular high-speed Internet market by charging them a high wholesale price in relation to the price at which the defendants were providing retail services. The U.S. District Court for the Central District of California sided with the ISPs and the U.S. Court of Appeals for the Ninth Circuit affirmed the ruling last year. Read more about the case at the SCOTUSWiki here.
The European Union's antitrust investigation of Intel is "discriminatory and partial," the computer chip manufacturer argued in an action that is detailed in a recent edition of the EU's official journal. The company, which has come under fire in the United States and in several other countries, complained that it is not being allowed to properly defend itself against charges that it has tried to shut out rival Advanced Micro Devices.
In the filing reported by the Financial Times and other news outlets, Intel claimed the European Commission failed to obtain "documentary evidence" from the complainant in the case, an apparent reference to AMD, and rejected Intel's assertion that it cannot respond to the antitrust charges without these documents, the journal stated. Intel said that decision was "manifestly illegal" but did not describe what documents it wants to see or how they would bolster the firm's claims of innocence.
Computer and Communications Industry Association President Ed Black issued a statement saying he was disappointed that Intel "has apparently chosen to attack the law enforcement organization that is investigating it" -- a tactic he said other companies have employed when they have concluded they cannot effectively argue the merits of their wrongdoing. Black said the EC's credibility is "strong" and the body has "consistently struck the right balance in antitrust action in recent years."
Surf on over to CongressDaily's TechCentral for a new "Issue of the Week." Here's a taste:
High-tech, telecommunications and media companies can expect increased antitrust scrutiny in President-elect Barack Obama's administration after eight years of what some believe has been a hands-off approach to marketplace competition within the Justice Department, the FCC and to some extent the FTC. The Democratic Illinois senator made ensuring competitive markets part of his campaign platform, which stated the United States needs "a business and regulatory landscape in which entrepreneurs and small businesses can thrive, start-ups can launch, and all enterprises can compete effectively while investors and consumers are protected against bad actors that cross the line."
Obama pledged to step up review of mergers and stop or restructure mergers that are likely to harm consumers while clearing those that do not pose such risks. According to a campaign position paper, Obama will strengthen antitrust authorities' competition advocacy programs to make certain that special interests do not use regulation to insulate themselves from the competitive process. He pledged to boost competition advocacy domestically and internationally and take steps to ensure that antitrust law is not used to interfere with competition or undermine efficiency to the detriment of U.S. consumers and businesses. Obama has said he will improve the administration of those laws in the United States and work with foreign counterparts to change their unsound laws and avoid needless duplication in enforcement.
Microsoft General Counsel Brad Smith on Wednesday cheered the Justice Department's finding that a now-defunct advertising agreement between rivals Google and Yahoo would have accounted for 90 percent or more of each relevant market and would likely harm competition in the Internet search advertising and search syndication fields. “The Department of Justice’s finding is significant for advertisers, publishers and consumers, who voiced overwhelming concern about this illegal deal to law enforcement and policymakers," he said.
Microsoft, which tried to buy Yahoo in a $44.6 billion unsolicited bid earlier this year, reportedly pulled out all the stops to make sure the ad-sharing deal did not go through. The company's intense lobbying against the arrangement and its executives' scathing public testimony when key congressional committees asked for views on the proposed endeavor from interested parties likely did not help matters for Google and Yahoo. Stifel Nicolaus analysts said in an e-mail that they would not be surprised if Yahoo shareholders pressed for an arrangement of some sort with Microsoft.
The analysts also pointed out that "this represents the first time to our knowledge that Google has bumped up against a situation where the government would not allow it to pursue a business venture, and as such is nevertheless not a welcome outcome." They argued that the deal was always more critical for Yahoo, which has struggled with a strategy for its future. Yahoo issued a statement saying the cancellation of the Google deal "does not change Yahoo's commitment to innovation and growth in search" and vowed to "continue to provide the cutting-edge advances in products, platforms and services that the industry needs and expects."
Continue reading Microsoft Wins In Google-Yahoo Deal's Demise.
Internet giants Google and Yahoo decided Wednesday to abandon their high-profile advertising agreement after the Justice Department informed them that it would file an antitrust lawsuit to block the long-planned deal. The agency said, if enacted, the arrangement would have accounted for 90 percent or more of each relevant market and would likely harm competition in the Internet search advertising and search syndication fields. Justice's reasoning echoed a chorus of concerns raised by key members of Congress, consumer groups and rival Microsoft in the months since the partnership was announced.
Senate Judiciary Antitrust Subcommittee Chairman Herb Kohl, D-Wis., House Energy and Commerce ranking member Joe Barton and others repeatedly expressed their apprehension over the deal since it was unveiled in June. Just last month, Barton wrote to the Justice Department urging officials to take a close look at largely unexplored issues of privacy and pricing arising from the proposed partnership. In his letter, the Texas Republican argued that Yahoo has resisted congressional inquiries about the arrangement, noting that "many of their responses seemed designed to obscure rather than clarify how the Google-Yahoo partnership would work." Yahoo insisted that it had "fully cooperated" with Barton's staff.
"The companies’ decision to abandon their agreement eliminates the competitive concerns identified during our investigation and eliminates the need to file an enforcement action," Assistant Attorney General Thomas Barnett said in a statement. "The arrangement likely would have denied consumers the benefits of competition -- lower prices, better service and greater innovation." The pairing would have let Yahoo replace a significant portion of its own search ad results with those sold by Google. Yahoo predicted the arrangement would generate as much as $800 million a year in additional revenue.
Continue reading Google, Yahoo Abandon Controversial Ad Deal.
The Justice Department will require Verizon Communications to divest assets in 100 areas in 22 states in order to proceed with its $28 billion buyout of Alltel Corp., the agency announced Thursday. The department said the transaction as originally proposed would have substantially lessened competition to the detriment of consumers of mobile wireless telecommunications services in those areas, and likely would result in higher prices, lower quality and reduced network investments.
The divestitures cover the entire states of North Dakota and South Dakota; swaths of the states of Colorado, Georgia, Kansas, Montana, South Carolina, Utah and Wyoming; and portions of the states of Alabama, Arizona, California, Idaho, Illinois, Iowa, Minnesota, Nebraska, Nevada, New Mexico, North Carolina, Ohio and Virginia, a DOJ press release said. The agency's antitrust division, along with attorneys general for several states filed a civil suit in a Washington, D.C. federal court to block the deal and offered a proposed settlement that, if approved by the court, would resolve competitive concerns.
According to the complaint, Verizon and Alltel are rivals and each is the other’s closest competitor for a significant set of customers in 94 cellular marketing areas, as defined by the FCC. The complaint alleges that the proposed transaction would substantially reduce competition for wireless services in each of those areas. The proposed settlement requires divestitures in these 94 areas to eliminate the competitive concerns. Proposed modifications to two existing consent decrees would require Verizon to divest businesses in six additional areas, officials said.
Continue reading DOJ Requires Divestitures In Verizon-Alltel Buyout.
The new Congress should reverse a 2007 Supreme Court decision that overturned nearly 100 years of antitrust precedent in Leegin Creative Leather Products v. PSKS, eBay deputy general counsel Tod Cohen told a high-tech conference on Friday. The 5-4 ruling allows manufacturers to set a minimum price below which a retailer cannot sell a manufacturer's product, which some believe threatens the existence of discounting and discount stores and could lead to higher prices for consumers.
Senate Judiciary Antitrust Subcommittee Chairman Herb Kohl, D-Wis., introduced a bill to restore the ban on so-called vertical price-fixing in the 110th Congress with Sen. Joseph Biden, D-Del., who is now the Democratic vice presidential candidate. At the Computer and Communications Industry Association summit, Susan DeSanti, a former FTC staffer and partner at Sonnenschein Nath & Rosenthal, added that Leegin was a "perfect example of a court reaching a decision for presumed inefficiencies or rationales that may or may not apply in particular circumstances."
The event examined the intersection of the high-tech industry and antitrust law with a look at the past, present and future of the field. Other speakers included: the Harvard University Cyberlaw Clinic's Phil Malone; former FTC Commissioner Mozelle Thompson; Antitrust Modernization Commission member Jon Jacobson; Google competition counsel Dana Wagner and a long list of former federal government officials from the FTC, Justice Department and other agencies.
The Justice Department released a joint status report Thursday on Microsoft's compliance with the final judgments pertaining to the U.S. government's landmark antitrust case against the high-tech giant. Microsoft has been working with plaintiffs in a handful of states known as “New York Group” and another group known as the “California Group.”
A few highlights:
Work on the Microsoft Communications Protocol Program (MCPP) continues to center on efforts to improve the technical documentation provided to licensees. Microsoft is continuing to work with a technical committee (TC) to finalize a system document template, which is taking longer than anticipated. Microsoft estimated it will complete the documents on March 30, 2009. To date, 28 licensees have signed up to receive free technical support and seven licensees have signed up for Windows source code access.
Plaintiff states and the TC continue to monitor developments regarding Windows XP and Windows Vista to assure compliance with the final judgments. This includes ongoing testing by the TC of Windows Vista, Vista Service Pack 1, XP SP 3, Windows Media Player 11, Internet Explorer 7 and beta versions of IE 8, to discover any remaining middleware-related issues. The TC’s review of early builds of Windows 7 continues.
The plaintiff states' interim status report filed in December 2007 informed the court of two complaints -- one of which was resolved earlier this year and the other remains under investigation. The New York and California Groups don't believe they have received any additional substantive complaints since the prior full status report. As of Sept. 12, Microsoft has received nine complaints or inquiries since the last joint status report in June. None were related to Microsoft’s compliance obligations under the final judgment.
Some interesting stats: Over 800 Microsoft employees and contingent staff are involved in work on the MCPP documentation. Of these, about 320 product team engineers and program managers are actively involved in creating and reviewing technical content. There are about 30 full-time employees and 50 contingent staff working as technical writers, editors, and production technicians. As testing continues, about 40 full-time employees and 425 contingent and vendor staff will work as software test designers, test engineers, and test architects.
Computer and Communications Industry Association President Ed Black said Tuesday that a Justice Department report on monopoly law "further muddied the legal waters" rather than clarifying U.S. antitrust regulations. "With this report, the DoJ has charged ahead alone and put forward a unique interpretation of Section 2 of the Sherman Act," he said. The agency's analysis, released Monday, sought to examine whether specific types of conduct run foul of that section of the Sherman Act.
Justice's sister antitrust regulatory agency, the FTC, distanced itself from the report citing its overly pro-business, anti-consumer bent, he said in a statement. The split interpretation "will create significant uncertainty in the business sector and likely harm effective enforcement efforts," Black argued. "With several high-profile antitrust cases currently being examined by regulators around the world, antitrust policy is playing an ever important role in our economy. It is important for regulators to get it right now."
Assistant Attorney General Thomas Barnett said single-firm conduct offers "some of the greatest challenges in antitrust enforcement today" and while conduct that harms competition must be flagged, "we also need to avoid interfering in the rough and tumble of beneficial competition that drives innovation and economic growth." Justice's report, he said, draws on commentary created during a series of hearings, judicial precedent and scholarly research.
The Association of National Advertisers, whose members include 400 companies with 9,000 brands, wrote to the Justice Department last week citing its objections to the announced Google-Yahoo search advertising partnership now under review by antitrust officials. The letter to Assistant Attorney General Thomas Barnett came after the group conducted a comprehensive, independent analysis of the deal, which included input from the board’s members and face-to-face discussions with Google and Yahoo.
The complaint, publicized on the group's Web site on Sunday, notes that a Google-Yahoo partnership will control 90 percent of search advertising inventory. Marketers are worried the pairing will diminish competition, increase concentration of market power, limit choices available and potentially raise prices to advertisers for quality, affordable search advertising, ANA President Bob Liodice said. Officials said the letter was sent privately and a copy is not being made public.
The agreement between the Web companies, announced in June, gives Google the ability to sell search and other text ads on Yahoo sites and Yahoo would get a cut of the profits. The deal was the focus of considerable congressional scrutiny before the August recess. Members of the House Energy and Commerce Committee and Senate Judiciary Antitrust Subcommittee have been particularly active on that front.
The Washington Legal Foundation on Friday will wade into a topic that has already sparked a heated congressional debate over antitrust and policy issues, which arise from competitor collaborations such as the recently announced search advertising deal inked between Internet rivals Google and Yahoo.
The Web briefing's speakers are former U.S. assistant attorney general Rick Rule and the former chief of a key merger and collaboration review unit of the Justice Department's antitrust division, Mark Botti. Rule, a partner at Cadwalader, Wickersham & Taft, has represented Microsoft in antitrust matters and that company has argued against the Google-Yahoo deal. Botti is an attorney at Akin Gump Strauss Hauer & Feld.
Executives for Google, Microsoft and Yahoo testified at a Senate Judiciary Antitrust Subcommittee hearing last month. Subcommittee Chairman Herb Kohl, D-Wis., said lawmakers must scrutinize the arrangement, which will give Yahoo access to certain Google advertising tools, to ensure that it does not "reduce Yahoo to nothing more than the latest satellite in the Google orbit." House Energy and Commerce leaders have also expressed concerns with the deal.
For more information on the event, click here.
IBM announced Wednesday that it is buying Platform Solutions, Inc., the high-tech giant's small but most significant competitor, which has sued IBM over anticompetitive business practices in Europe and in the United States. Financial terms were not disclosed but PSI's technologies, along with its intellectual capital, will become part of IBM. As part of the deal, both IBM and PSI dropped their respective claims against each other.
"We are pleased to become part of IBM, knowing IBM has the industry's most comprehensive vision for the future direction of enterprise computing, and has the requisite technologies to realize that vision," PSI CEO Michael Maulick said in a press release. "This acquisition makes the most sense for our companies -- to collaborate on future technology offerings and maximize our combined knowledge and skills for the benefit of IBM clients globally."
Computer and Communications Industry Association President Ed Black (who has never been one to pull his punches) called the transaction "a Black Hole acquisition." "It sucks the life out of the market and destroys the matter. Transforming a market with latent potential for competition and innovation into a sector with little prospects for anything but complete domination by IBM," he said.
Members of the American Antitrust Institute will have plenty to discuss at their annual conference, which kicks off on Wednesday at the National Press Club. It's been a busy year for competition and consumer protection issues, mergers and related topics in industry and on Capitol Hill.
In addition to the group's presentation of a forward-looking report on competition policy for the next administration, a few highlights include:
A More Expansive View of the FTC: FTC Watch's Art Amolsch; former FTC Commissioner Thomas Leary and former FTC adviser Robert Skitol.
Media Issues: Brownstein Hyatt Farber Schreck shareholder Allen Grunes; University of Baltimore professor Robert Lande; Glover Park Group partner Jonathan Sallet; and Stanford Group researcher Jaret Seiberg.
The Politics of Antitrust: Computer & Communication Industry Association President Ed Black; Public Citizen President Joan Claybrook; and Harvard Law School professor Einer Elhauge.
More information is available here.
Stifel Levin analysts believe that Yahoo's Thursday announcement to team up with Google on Internet advertising could face serious antitrust scrutiny. The companies do not need to obtain advance approval from the government as they would for a merger, but the Justice Department could still move against them if it found the arrangement to be anti-competitive, they said.
Google had already notified the department of a prior experiment with Yahoo, and they have continued to "socialize" the deal, agreeing not to start the partnership until roughly Oct.1, giving Justice time to review it, analysts said. They added that by restricting the deal to the United States and Canada, the parties may be trying to avoid European Union antitrust scrutiny, where regulators have been viewed as more aggressive than DOJ.
Google and Yahoo executives need to do a better job than they have thus far to answer questions about "why the efficiencies of the deal won't ultimately lead advertisers to move to Google, leaving Yahoo without a viable search advertising product and Google as the only search advertising game in town."
Senate Judiciary Antitrust Subcommittee Chairman Herb Kohl, D-Wis., is going to keep a close eye on Google's newly announced deal with rival Yahoo, the lawmaker said in a Thursday statement. Several months ago, Kohl also pledged to watch over a proposed deal between Yahoo and Microsoft, which eventually soured.
"This collaboration between two technology giants and direct competitors for Internet advertising and search services raises important competition concerns," he said. "The consequences for advertisers and consumers could be far-reaching and warrant careful review, and we plan to investigate the competitive and privacy implications of this deal."
Google Vice President Omid Kordestani posted a message on Google's corporate blog saying that the Web giant was entering into a non-exclusive advertising agreement that will provide Yahoo with access to Google's AdSense for search and AdSense for content platforms on their U.S. and Canadian Web properties.
The deal comes as the Senate Commerce Committee plans to hold a hearing on the privacy implications of online advertising next week. Witnesses are expected to focus on the key factors driving online behavioral advertising, the methods of online behavioral advertising employed by industry, and the protections the FTC and FCC should adopt to protect consumers from unwanted or unnecessary invasions of privacy.
Continue reading Senate To Keep A Watchful Eye On Google-Yahoo Deal.
U.S. Electronics, which used to produce receivers for Sirius Satellite Radio, has filed a Freedom of Information Act complaint against the FCC to try to get information from Sirius and rival XM before the commission rules on their proposed merger. The materials sought are "directly relevant to the FCC’s determination whether the public interest will be served or harmed" by the pairing, the complaint states.
According to a press release, the documents requested relate to Sirius and XM's alleged noncompliance with various FCC regulations, including: failure to make available an interoperable radio almost 10 years after the FCC required them to do so; noncompliance with tower and antenna placement authorization and allowable transmitting levels; and deliberately exceeding FCC emission standards.
"These documents are likely to speak directly to the candor of Sirius and XM." U.S. Electronics' Kathy Wallman said, noting that the satellite radio providers are "fighting awfully hard to keep these documents from seeing the light of day; it makes you wonder what they are trying to hide."
The waiting game continues. Sirius Satellite Radio and rival XM said Wednesday that they have agreed not to exercise their rights to terminate their merger agreement prior to May 15 and will extend the deal, as necessary, for rolling two-week periods as they await a decision on the pairing from the FCC.
The Justice Department ended its investigation of the deal in March and concluded that the combination of the two music companies would not be anticompetitive. FCC Chairman Kevin Martin said his agency would act after Justice released its findings but there's been no news thus far. Sirius and XM stakeholders blessed the deal last November.
The American Antitrust Institute on Tuesday slammed the Justice Department's approval of Sirius Satellite Radio's proposed merger with rival XM. The group had urged the agency to conclude that the pairing violates a section of the Clayton Act that requires courts to predict when the effect of a merger "may be substantially to lessen competition, or to tend to create a monopoly."
Justice stated that the merger will not be stopped "because the evidence did not show that the merger would enable the parties to profitably increase prices to satellite radio customers." In doing so, the agency created a higher standard -- replacing "may" with "would" - and focusing only on the effect on prices, AAI said. Other antitrust considerations like diversity, choice, and innovation were "either ignored or shortchanged."
The decision also suggested that Justice officials used a lower standard for alleged efficiencies, accepting them if they "could benefit consumers." "The DOJ should enforce the law that Congress wrote, not the law they prefer," AAI President Bert Foer said.
When it came to market definition, Justice used a broad brush, including a variety of sources of audio entertainment. AAI believed the market should have been more narrowly defined as satellite broadcast radio because it has "many special qualities that set it apart" from other platforms.
As the matter proceeds to the FCC, the antitrust group said it would be "perfectly acceptable" for the Commission to reach a different conclusion from Justice given the different standards and concerns of the agencies.
The FCC is expected to consider the pending merger between Sirius Satellite Radio and rival XM -- and approve it with conditions by May 1 or soon thereafter, Medley Global Advisors said in an e-mail update Tuesday. The Justice Department OK'd the pairing on Monday after more than a year-long review.
While FCC Chairman Kevin Martin may try to circulate an order seeking approval of the transaction in the weeks ahead, analysts said Congress and all five FCC commissioners maintain drastically different views on merger approval orders and the broader issue of media consolidation.
Martin's two Republican colleagues -- Deborah Taylor Tate and Robert McDowell -- are "likely to insist that no conditions be placed" on the deal but one exception may involve a condition supported by one or both to extend the FCC's indecency rules to the merged entity to ensure that edgy content is kept in check, Medley said.
The FCC's two Democrats -- Jonathan Adelstein and Michael Copps -- "may be inclined to support meaningful behavioral safeguards to reduce the potential for anticompetitive harms to occur given concerns raised by some ratepayer groups," analysts added. "It will be no easy task to strike this balancing act."
Possible conditions, according to the analysts, include:
- The a la carte/tiered programming package option
- Price caps (for three to five years)
- Spectrum spin-offs to noncommercial and minority programmers
- Mandatory device interoperability
- Prohibition on sole-source contracts on devices
Here's my amateurish attempt at a reasoned [illustrated] analysis of the impact of the Justice Department's approval of the merger of Sirius Satellite Radio and rival XM. I'm quite sure that highly paid telecom analysts could articulate this better. Meanwhile, I bet the the folks at Sirius and XM are clinking their martini glasses right about now.
CongressDaily TechCentral Breaking News:
The Justice Department on Monday afternoon cleared Sirius Satellite Radio's estimated $14 billion merger with rival XM, finding that the proposed pairing is not likely to substantially lessen competition or harm consumers. The ruling, which was more than a year in the making, divided members of Congress as well as competition and consumer watchdogs.
A number of lawmakers, including Senate Judiciary Antitrust Subcommittee Chairman Herb Kohl, D-Wis., expressed opposition to the merger. Justice's antitrust division said evidence did not show that the merger would let the parties hike subscription prices, partly because the two do not compete in important segments of the market. Justice also cited the widespread availability of alternative services like Internet radio and iPods.
SIRIUS and XM each obtained stockholder approval in November 2007 and the deal is still subject to FCC approval. More details will be available on TechCentral shortly.
Update: The full story is available here with input from Justice Department antitrust division chief Thomas Barnett; Sen. Kohl and Rep. Steve Chabot, R-Ohio; the National Association of Broadcasters; analysts and others.
Former Attorney General Dick Thornburgh had some harsh words for the proposed merger of XM Satellite Radio and its rival Sirius in a Washington Times op-ed on Monday. In it, he wrote that "a failure in leadership at the Justice Department will expose this merger to a free-for-all at the FCC to create a regulated monopoly."
The deal "cries out for decisive action by the Justice Department under the Clayton Act, because it will completely eliminate competition in satellite radio," the Reagan administration's top lawyer said. "Current and future subscribers will be subject to whims of a monopoly, which will impose additional costs on consumers," he warned.
Why does the agency continue to deliberate? "The prolonged delay can be explained, at least in part, by the vast number of transactions piling up for department review as Wall Street hastily moves toward further industry consolidations before a change in guard following the presidential election," Thornburgh explained.
I don’t know about you, but I'm going stir-crazy waiting for federal regulators to act on the year-old merger proposal for XM Satellite Radio and rival Sirius. The Justice Department is expected to act soon, analysts say, and the FCC will follow suit.
For months, merger-watchers have been inclined to believe that the combination, albeit delayed, would get the government's blessing but now at least one analyst isn't as hopeful. The merger "now appear less likely," Pacific Crest analyst Erik Olbeter said in a research note.
"Prospects for the merger have become increasingly cloudy," he said, noting that the waiting game suggests Justice and the FCC are having trouble justifying the deal. Olbeter says he hears both agencies "are inclined to approve the merger" but that "an argument for the deal that does not set a significant, far-reaching precedent appears elusive."
(Hat-tip to Baron's TechTrader for pointing out Olbeter's note)
The Wall Street Journal's "Deal Journal" blog has an interesting post that reflects on the one-year anniversary of the pending merger of satellite radio giants Sirius and XM. I wrote about this issue in Wednesday's CongressDaily [click here to read the story].
WSJ blogger Stephen Grocer contacted the folks at FactSet MergerMetrics to help put in perspective how long the proposed pairing has been blowing in the wind. A few samples:
349 -- The number of transactions announced involving the full acquisition of a U.S. publicly traded company in which a definitive agreement was reached since the XM/Sirius announcement.
230 -- The number of those deals that have been completed. That includes Whole Foods’s acquisition of Wild Oats, which took roughly six months and one embarrassing lawsuit by the Federal Trade Commission before it was completed.
97 -- The number of those deals still pending. That doesn’t include Google’s purchase of DoubleClick, another high-profile deal that received regulatory scrutiny. That deal is awaiting European regulatory approval, but received FTC approval in December.
Read the full rundown here.
Congressional antitrust crusaders might be able to cool their jets for a while. The Wall Street Journal reported Saturday that Yahoo's board of directors plans to reject Microsoft's unsolicited $44.6 billion acquisition offer. The decision apparently came after a series of meetings during which Yahoo's board decided the offer "massively undervalues" the Web firm.
The Journal cited an unnamed person familiar with the deal. Similar reports appeared later in the New York Times and the Washington Post. A letter from the Yahoo board formally rejecting the deal is expected to be issued Monday, the Post reported in its Sunday edition.
The House Judiciary Committee's Task Force on Antitrust and Competition Policy hearing on Friday to examine Internet competition -- namely, Microsoft's possible purchase of Yahoo -- has been postponed. Aides cited scheduling conflicts as the reason behind the cancellation.
Meanwhile, leaders of the Energy and Commerce Commerce, Trade and Consumer Protection Subcommittee said Wednesday that they will hold hearings this spring to tackle competition and consumer privacy issues raised by the merger of Web firms. Chairman Bobby Rush, D-Ill., said he will also request a confidential briefing from "appropriate government regulators."
The San Jose Mercury News published a confidential, internal e-mail from Yahoo CEO Jerry Yang that tells his employees that "absolutely no decisions have been made" about whether the company will take Microsoft's $44.6 billion buyout offer.
"This proposal is just that -- a proposal. And it was only made in the last 24 hours. You can be sure the board is going to review it thoughtfully and carefully, and do what's right for our great company." Read the e-mail here.
Meanwhile, Scott Cleland, president of the telecom research firm Precursor, says Google "must have been caught off guard last week by the Microsoft-Yahoo bid because they are reacting quite rashly and arguably in a way that is not in the best interests of their shareholders." Read more.
Google wasn't prepared to comment on Microsoft's $44.6 billion bid for Yahoo on Friday when I wrote my initial CongressDaily story but by Sunday, the Internet giant was ready to gripe.
Google's top lawyer David Drummond wrote on the company's blog that "Microsoft's hostile bid for Yahoo raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation."
He asks the following questions:
"Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?"
"Could the acquisition of Yahoo allow Microsoft -- despite its legacy of serious legal and regulatory offenses -- to extend unfair practices from browsers and operating systems to the Internet?
"Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' e-mail, IM, and web-based services?"
Policymakers around the world need to ask these questions -- and consumers deserve satisfying answers, Drummond concludes. Interestingly, his post hasn’t made its way onto the Google Public Policy blog yet.
Continue reading Google Slams Proposed Microsoft/Yahoo Deal.
Friday's announcement that Microsoft wants to buy Yahoo for $44.6 billion not only riled privacy and antitrust watchdogs but it also excited analysts. Jessica Zufolo, a senior telecom analyst at Medley Investment Group, said the proposal "raises a lot of complications" if Yahoo takes the bait.
The combination would likely "stir a lot of unrest on Capitol Hill and in the consumer services community about the kinds of antitrust concerns that increased consolidation would mean" -- especially in the search market, which is dominated by Google, she said.
Time Warner, which owns America Online, as well as other competitors may oppose the merger at the FTC, Justice Department and in Congress, Zufolo said. There is little doubt that regulators and antitrust officials "will take a very slow, careful review" if Yahoo accepts Microsoft's offer.
Google's merger with online ad firm DoubleClick "was a large transaction and it indeed cleared the way for other transactions," she said. Yahoo's partnership with AT&T and Microsoft's filings at the FCC may also raise questions. "It opens up a Pandora's Box of federal regulatory review -- not to mention possible [interest from] state attorneys general.
A Google spokesman said "it would be premature to comment at this point" and an AOL official declined to comment.
U.S. District Judge Colleen Kollar-Kotelly decided late Tuesday that federal oversight of Microsoft's market power, which began in 2002 after a major antitrust settlement, will extend by 18 months [Read more in Wednesday's Technology Daily PM Edition]. Ten states, led by New York and California, lobbied the court to extend its watch over the software giant until 2012.
After deadline, Jay Himes, chief of New York Attorney General Andrew Cuomo's antitrust bureau, sent us a statement from Cuomo saying he was "pleased that the court recognized how important it is to keep the antitrust decree against Microsoft in place to protect consumers and promote fair competition."
The extension will help "ensure that Microsoft fully complies with the requirements of the consent decree and helps stimulate competition in the personal computers marketplace," Cuomo said.
John Lopatka, co-author of a recent book on the Microsoft case e-mailed with a different view. He said Kollar-Kotelly seemed "frustrated that a remedial provision that had a shaky justification from the beginning and has proven competitively unimportant has been difficult to implement."
The Pennsylvania State University law professor said Kollar-Kotelly's stance on Microsoft "is a bit schizophrenic." "The judge lauds Microsoft for working to resolve problems and simultaneously condemns it for allowing the problems to arise," he said.
The Electronic Privacy Information Center plans to take its complaints about the FTC's approval of Google's multi-billion dollar merger with DoubleClick to Capitol Hill. The agency gave the controversial pairing its blessing on Thursday [see Technology Daily's PM Edition for more].
EPIC's director Marc Rotenberg said he will "bring this matter to the appropriate congressional oversight committees that are responsible for the agency’s funding and statutory authority." His group has also submitted a series of expedited Freedom of Information Act requests to the FTC regarding the commission's review of the merger.
The FTC "had an opportunity to establish the necessary safeguards for personal data and competition that could have allowed a global framework to emerge," Rotenberg said in a statement. "Instead, the commission's failure to act leaves the question of how best to address the privacy and competition implications of this deal to others."
The agency, which he notes, is "funded by taxpayer dollars," has the sole purpose of protecting the public interest. "It failed to do so today in a case that will have far-reaching implications for the Internet economy and the privacy rights of American consumers," he said.
Meanwhile, Sen. Orrin Hatch, R-Utah, told us he still has concerns with the merger "especially as it relates to competition and privacy." "Given the relative youth of the Internet, a merger of this kind is unprecedented and no one can predict how it will affect the industry," he said.
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